Financial Stress: How best to tell to your Lender

It is inevitable as a producer you will be faced with adversity, whether weather-related events, volatile markets, labor issues, regulatory burdens, or perhaps farm policy shifts. If you are faced with a substantial financial loss in your farming or ranching operation, what should you do when it comes to communicating this to your lender? Here are a few suggestions that, if followed, will empower and position you to have greater control of your situation when dealing with financial adversity.

1. Be pro-active. Schedule a time to meet with your lender to communicate the challenges you have encountered. While it’s not something anyone would relish, this early communication is a good step in building trust with your lender.

2. Be Prepared. Before the scheduled meeting, know where you are financially. Have your assessment of the financial loss both in terms of the actual $ amount and why it occurred. Whether it’s professionally prepared or done by you, have a current balance sheet and income statement that reflects the current situation. Having this information ready to share will provide your lender with what is needed to understand the impact to your business.

3. Have a Plan. Have a solution ready to offer that addresses the financial loss you have encountered. The plan itself will depend on many factors including the severity of the losses and more than likely may require lender approval. By exploring options ahead of time, you will be better equipped to develop an effective and realistic plan together.

4. Be professional and be patient. The reality of a financial loss is very stressful and can become emotionally charged as you must deal with its impact across many fronts. Your lender may need more time than normal to respond to your needs and that can add to the stress. Understanding more time may be required for resolution and maintaining a calm, reasoned approach in your conversations can provide the basis for reaching the level of communication necessary to arrive at a mutually agreeable solution.

Scotty Elston is chief credit officer with AgTexas Farm Credit Services in Lubbock, Texas. The lending cooperative serves 23 counties west of the Dallas/Ft. Worth metroplex and north to the panhandle of Texas. Cotton, dairy, beef cattle, and grains are the most prevalent commodities financed as well as a large number of part-time farms and ranches and rural homes.